To better help community banks and licensed non-banks comply with state and federal regulations, CSBS regularly develops Job Aids that include valuable resources and tools for the industry. The most popular Job Aids currently available include the Current Expected Credit Losses (CECL) Readiness Tool and two Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Self-Assessment Tools.

The CSBS State Supervisory Processes Committee developed and approved the above tool to help financial institutions prepare for the coming changes surrounding the Current Expected Credit Losses (CECL) method.

The tool provides a framework that a financial institution could use to plan for the eventual implementation of these accounting changes. CECL will have a significant impact on the way a financial institution estimates and provides for credit losses and early preparation is prudent.

This tool is offered as a resource and should be used as-needed. While some institutions may already be planning for CECL implementation, smaller institutions in particular reported difficulty understanding the changes and sought a straightforward tool to begin the planning process. This tool offers a means to get started and helps an institution set internal goals for the different implementation steps.

CSBS and a group of state BSA/AML subject-matter experts developed the BSA/AML Self-Assessment Tool to be used at the discretion of a financial institution to help in the BSA/AML risk assessment process. It is flexible and intended to be adapted to each institution’s circumstances and risk profile. As the instructions above state, the tool is not a replacement for other aspects of an institution’s BSA/AML risk management program, but is an optional supplement to that program.

Additionally, state regulators to developed an optional BSA/AML Self-Assessment Tool for Money Services Businesses. The Bank Secrecy Act and related federal and state law requirements are a crucial component of money services businesses operations. As a first line of defense for financial crimes, MSBs play an important role in minimizing fraud, money laundering, terrorist financing, and other financial crimes.

The call for papers for the 2018 Community Banking in the 21st Century research and policy conference is now open. The conference committee is seeking papers that explore all aspects of community banking, including: the role of community banks in the U.S. financial system; advantages and disadvantages of the community bank business model; the effects of government policy on community banks, significant challenges faced by community banks and new opportunities for community banks. The deadline to submit a detailed abstract or completed paper is June 15, 2018. Authors of accepted papers will be notified by August 3, 2018. Submissions should be e-mailed to: conference@communitybanking.org. The conference committee will issue a new award this year to recognize the accepted paper that it identifies as making the most significant contribution to banking policy. The conference will take place Oct. 3-4 at the Federal Reserve Bank of St. Louis.

Final Teams Announced For 2018 Case Study Competition

CSBS has announced 54 student teams from 47 colleges and universities around the U.S. will participate in its 2018 Community Bank Case Study Competition. Each student team must develop an original case study that evaluates how community banks are using technology within day-to-day operations. Finalists will be announced during the CSBS State-Federal Supervisory Forum in Jacksonville, Florida on May 10, 2018. Additional information on the competition can be found on the case study competition website.

Alvernia University; Arkansas State University; Bowling Green State University; California University of Pennsylvania; Claflin University; Concordia College; DePaul University; East Stroudsburg University; Eastern Kentucky University; Fairfield University; Florida State University; Fort Hays State University; Grove City College; Immaculata University; Iowa State University; James Madison University; Kutztown University; Louisiana State University; Mansfield University; Marquette University; Merrimack College; Middle Tennessee State University; Mississippi State University; Murray State University; Nicholls State University; Northern State University; Penn State Harrisburg; Purdue University; Saint Vincent College; Southeastern Louisiana University; The Ohio State University; The University of Tennessee at Martin; Trine University; University of Arkansas; University of Hawaii at Manoa; University of Houston; University of Iowa; University of Missouri - Kansas City; University of Nebraska at Kearney; University of Northern Iowa; University of Pittsburgh at Johnstown; University of Texas at San Antonio; University of Wisconsin – Whitewater; Ursinus College; Washington University in St. Louis; Western Carolina University; York College of Pennsylvania

2017 National Survey of Community Banks cited in recent American Banker Article

The article cites data from the 2017 National Survey to highlight the current cost of compliance for community banks. The National Survey is conducted annually by the state banking commissioners. Results from the 2018 survey will be presented during the 6th annual Community Banking in the 21st Century Research and Policy Conference scheduled for October 3-4 at the Federal Reserve Bank of St. Louis. The annual conference is co-sponsored by the Federal Reserve System and the Conference of State Bank Supervisors.

State Regulation: What Does the Next 10 Years Look Like?

by John W. Ryan
CSBS president and chief executive officer

This piece was originally published immediately following the 10th Annual NMLS Conference.

The 10th anniversary of anything is special. It can make you realize how much has changed. When I think back to the 10th anniversary of joining CSBS in 2007, it seems like a world away.

Around this time, state regulators had grown concerned about problems in the mortgage market, which had become the Wild West of financial services. A few regulators, led by Gavin Gee of Idaho, were working on an idea: a nationwide system to license mortgage professionals.

Soon thereafter, the financial crisis happened, mortgage markets collapsed, and Congress sought ways to ensure accountability and transparency in that sector. One solution: mandating the use of our licensing system. Suddenly, our idea had become national public policy.

The development and deployment of NMLS, the Nationwide Multistate Licensing System, forever changed an industry. It created the means to validate mortgage professionals -- in the eyes of both regulators and the public -- as properly licensed and operating in good standing, a development that help bring much-needed stability to a troubled market.

Now, here we are, 10 years after the formal launch of NMLS. And much like the graying of my hair, the NMLS in 2018 looks different than the NMLS of 2008.

We have become a repository of an enormous amount of data – on 23,000 companies, half-a-million individuals, and countless transactions -- that other regulators and federal agencies rely on: the CFPB, FinCen, FTC, and Office of Financial Research. We conduct criminal background checks, supported by the FBI, through NMLS. Surety bonds can be generated electronically.

What’s more, state regulators have expanded their use of NMLS to other non-banking industries, such as money transmission, debt collection, and consumer finance. Call Reports have been established for mortgages and money services businesses (MSBs). Industry and consumers use a web-based portal to check on companies, individuals and any adverse regulatory actions. Sixty-two state agencies use NMLS for mortgages, and 40 do so for MSBs.

That is a lot of progress in a single decade. Now, NMLS did not cure all issues of mortgage supervision; there is still work to do. But the 10-year mark of NMLS is worthy of celebration.

Today, we are asking ourselves, “What does the next 10 years look like?”

We start with an assumption: nonbanks are here to stay. Ten years removed from the financial crisis, nonbanks are still originating almost half of all residential mortgages. Based on our Call Report data, MSBs transferred more than $1 trillion in 2017. Both are impressive figures, and indicative of the future.

As nonbanks modernize the financial services industry, we as regulators are modernizing the state regulation of nonbanks. We must ensure safety and soundness and consumer protection in this sector. We must do so in a way that enables business innovation that can benefit local communities. And that means properly addressing fintech. From our discussions with fintech companies, we have seen how greater use of technology is altering business models, delivery systems, and customer experiences.

That’s why states have been exploring how fintechs and other nonbanks can become licensed more quickly and scale regionally or nationally more easily, while regulators provide increased focus on core issues of risk. We are mindful that our approvals, when we give them, must set a high standard that creates confidence in consumers who wish to use fintechs and other new firms.

At CSBS, we have given shape and form to our plan. Last spring, state regulators adopted a policy statement that commits them to achieving an integrated, 50-state system of licensing and supervision for nonbanks. We have since identified several initiatives to achieve this goal -- which collectively we refer to as Vision 2020 – and we have made good progress.

A fintech industry advisory panel, organized by CSBS, to help identify pain points in the multi-state experience and develop possible solutions. Thirty-three companies serve on our panel, with subgroups on money transmission and lending. These industry leaders have met multiple times with state regulators, and are working on recommendations.

State-level activity to harmonize differences in licensing and supervisory practices. We have already seen several states come together on a multistate agreement to streamline the licensing process in those states. We expect further efforts to emerge.

A next generation technology platform, developed and operated by CSBS, that becomes a one-stop shop for licensing as well as supervision. One that enhances NMLS to leverage data analytics to streamline the multi-state licensing process. One that expands NMLS to include a new system where state examiners can better identify company risks, standardize more of the exam process, and more easily share information with other states. We have been working on the licensing component, which we will deploy first. Then it will be followed the new supervisory system.

Training and a new state accreditation system, offered by CSBS, that enable and validate state efforts to modernize their banking departments. Improvements such as identifying and addressing weaknesses, focusing expertise where it is most needed, comparing and learning from other states, and updating supervisory processes. Our training programs are ongoing. And we just deployed an accreditation online system.

The message is clear: the states are energized and they are active.

They see how these and related initiatives will help modernize the state regulatory system for nonbanks. Setting high standards. Harmonizing differences among the states. Producing more and better decisions in less time. Creating more accountability and integrity for new industry sectors. And doing all this while protecting personal data and consumers from bad actors.

One important point should not be lost: state regulators are addressing a technology-powered development – the friction fintechs are experiencing in the multistate arena – with technology-powered solutions of our own.

Makes us remember that our answers often lay in the questions themselves. That was true 10 years ago. It is true today. And it will be true 10 years from now.